How VARs Can Help Defeat Showrooming

By Julie Ritzer Ross — January 18, 2013

Last January, Target sent a letter to its suppliers, warning them that it was no longer willing to allow online-only retailers to use its stores to showcase their products, then undercut its prices without making investments, as the mega-merchant itself does in displaying their brands. Several months later, Target went one step farther, ceasing to sell Amazon’s Kindle e-readers in its 1,770 stores and on its website. Target had carried the Kindle since 2010, and had previously deemed it the best-selling tablet in its stores on Black Friday 2011.

Such actions comprised Target’s attempt to minimize or eliminate showrooming, wherein consumers use brick-and-mortar stores to research and get up close and personal with merchandise, then use their mobile devices to compare the price of the desired items with those charged by competing retailers, particularly online-only players like Amazon. Such a practice is becoming increasingly pervasive: 80 percent of retail participants in a study released by Edgell Knowledge Network (EKN) in partnership with eBay Local said they expected showrooming to adversely affect their business during the 2012 holiday season; anticipated average sales losses were pegged at five percent.

In even more significant news for retail players served by the channel, showrooming is neither limited to big-box stores, nor to categories like electronics, appliances and home furnishings. “We are definitely hearing about it from our SMB merchants; there’s no question it’s touching them,” says David Alston, a partner at Houston-based VAR Retail Information Systems (www.goretailpro.com). Alston adds that with the exception of supermarkets, convenience stores and, in certain instances, drug stores, no retail vertical can now be considered exempt from the showrooming phenomenon. For example, he observes, there exists a heightened tendency among consumers to avoid return hassles by going to a local shoe store to try on shoes prior to ordering them online.

Jason Richelson, co-founder and CEO, ShopKeep (www.shopkeep.com), corroborates Alston’s comments. He notes that during his tenure as a wine and provisions retailer in Brooklyn, N.Y., it was not uncommon for his customers to ask a multitude of questions about the different wine options on the shelves, as a means of deciding what they would subsequently purchase on a discount wine website.

Showrooming is here to stay, asserts Guaray Pant, research director, EKN. “One in four shoppers used their mobile phones to compare prices while in the store during the 2011 holiday season and those numbers will only grow. But the good news is that retailers can put strategies in place to help counter the effects of showrooming by engaging consumers actively, integrating their online and offline channels, and prioritizing their investments to counter showrooming.”

STEMMING THE TIDE
Accordingly, VARs should make available to retailers a variety of anti-showrooming tools. Solutions that facilitate customer engagement and enhance the shopping experience are essential. For example, store associates equipped with tablets can provide shoppers with a level of service not accessible online, leveraging the units to offer detailed comparisons of products and other information that may encourage them to complete a purchase on the spot. “Suppose a customer is looking at LCD televisions,” proposes Joseph Finizio, president and CEO, Retail Solutions Providers Association (www.gorspa.org). “Using a tablet or similar device at the point of decision, a salesperson has the ability to explain in depth the various features and what distinguishes one brand from the other(s); point out why one size may be a better choice than another for that particular individual, and the like.” This type of customer engagement renders it more difficult for shoppers to walk away empty-handed—especially if combined with the option of paying for merchandise in the aisles via retailers’ mobile technology or their own smartphones rather than enduring a wait at the checkout counter.

“The more information customers can get out of store associates—including being steered to an alternative version of the product they want that may be less expensive than what they have seen online, but suits their purpose better—the more indebted they will feel to the retailer,” Richelson observes. “However, that won’t happen without technology.”

Applied creatively, digital signage also has strong potential to up the customer engagement ante and give customers the information and impetus they need to convert a showrooming expedition to a store visit that culminates in a sale. Results of a recent, month-long digital signage pilot undertaken by Aubuchon Hardware, a hardware retailer with about 130 locations in the Northeastern U.S., in conjunction with the North American Hardware Retailers Association (NHRA) lends credence to such a claim.

For the test, endcap digital signage displays from BrightSign (www.brightsign.biz) were deployed in six Aubuchon stores and used not to only to focus on price and savings, but to educate shoppers as to the benefits of using three products—smoke detectors, air filters and interior paint—in their homes. Customers who desired additional information about the item(s) could press a button to activate short instructional video(s). Unit and dollar sales in the test stores were significantly higher than those in six non-test stores that had displayed similar sales patterns before the trial began, with unit sales of smoke alarms up by 44.8 percent and dollar sales increasing by 37.5 percent. Air filter sales rose by 178.1 percent and 175 percent, respectively; interior paint sales by 23 percent and 17 percent.

Jeff Hastings, CEO of BrightSign, notes that another retailer uses digital signage in a kiosk-based showrooming antidote wherein when a customer picks up an RFID-tagged shoe, a signage controller initiates playback of a video that promotes the footwear’s body-friendly benefits. Shoppers can also use the kiosk’s interactive touchscreen to uncover information pertaining to a given shoe model (like which celebrities are wearing it) and to view other news coverage that highlights the style in which they are interested in purchasing. “Such a level of interactivity and customization delivers a personalized shopping experience that greatly increases the rate of conversion,” Hastings states.

Loyalty programs, too, play a role in deepening customer engagement and, concomitantly, diffusing showrooming—but only, sources say, if they are targeted at and optimized to appeal to a specific cadre of consumers. Structuring programs to address concerns that lead or contribute to showrooming has a similar effect. IKEA Family, IKEA’s loyalty program, comprises an example of the latter. It rewards customers with members-only pricing on furniture and other exclusive deals and offers, including a monthly sweepstakes with a prize of $100. Once consumers have enrolled in the program, they receive mobile alerts about new offers, along with access to a members-only website and e-mails. Shoppers who want a discount on in-store purchases, but have forgotten their membership cards, can send an SMS message to the cashier, who can then retrieve the correct membership number and grant the discount.

In customizing loyalty programs for showrooming-adverse clients, it may behoove VARs to heed EKN’s recommendation. Specifically, EKN advocates incorporating premium services, such as free local delivery for “elite-level” customers, into the rewards structure. The group also suggests that retailers be equipped with applications that allow targeted offers to be generated based on demographic and behavioral data, similar to popular price comparison apps. A hefty portion of such offers should be designed to attract to given stores individuals who do their showrooming elsewhere.

EMPOWERMENT AND MORE EMPOWERMENT
Customer engagement tools are not the only one form of ammunition with which channel players must supply merchants to keep showrooming at bay. Rather, empowerment solutions—for retailers as well as for customers themselves—are a part of the same package.

Because the quest for the lowest possible cost drives the bulk of showrooming activity, it behooves bricks-and-mortar retailers to match online pricing whenever feasible. VARs must therefore have solutions available that empower store associates to ascertain, at the point of decision, what type of price break they can offer customers and/or whether such value-adds as free accessories, complimentary delivery/setup (if applicable) and (again, if applicable) an attractively priced service plan can be added to the mix, Finizio says.

Frank Riso, senior director and global leader, retail practice, Motorola Solutions (www.motorolasolutions.com) agrees. He adds that retail management must also be empowered, through technology, to identify showroomers and direct store associates to attempt to engage them as they peruse products. The newest version of Motorola’s Smart Badge solution enables retail managers to see when smartphone-wielding shoppers are viewing competitors’ websites in-store. Store associates fitted with Smart Badge wearable computer can then be sent messages indicating that an individual is showrooming, and requesting that they please engage the person, Riso explains. The solution integrates with task management and mobile workforce management applications.

Also on the “must list” are solutions that let consumers check the availability of merchandise in a particular store online and in real time, so that they are more apt to pick it up immediately. Applications designed to support certain aspects of omni-channel retailing—for example, online ordering followed by in-store pickup and the shipment of desired out-of-stock items from another store or a fulfillment center straight to consumers’ homes—round out the roster.

The convenience afforded by these solutions can, and for many consumers already does, “become more attractive compared to ordering from Amazon, say, and waiting for an order to arrive or going from website to website or store to store trying to find it at the right price,” concludes Will Atkinson, president, CAP Software (www.capretail.com). Showrooming needs to be attacked from many different sides, but it’s a threat that can be managed.